F1 Team Salaries Surge 75% To $70 Million

The average team wage bill in F1 accelerated by 77% to $70 million over the decade to 2017 (Photo by Mark Thompson/Getty Images)

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The impact of unchecked spending in Formula One auto racing has been revealed in new research which reveals that over the decade to 2017 the average wage bill per team accelerated by 76.7% to $69.6 million (£52.9 million).

To put it in context, the typical staff bill of an F1 team could fund the entire annual budget of six teams in IndyCar or the electric-powered Formula E series.

The increase in F1 wage bills has been driven by a surge in staff numbers from an average of 512 per team in 2007 to 620 in 2017, the latest year for which a complete set of financial statements is available.

The more staff a team has, the greater the gains it can make in development and the greater its chances of success. As the graph below shows, this has fueled an arms race between the teams which has almost doubled the average staff bill from $39.4 million (£29.9 million) in 2007.

Average F1 team staff costs only reversed once in the decade to 2017

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This has sent four of the teams into the wall over the past five years alone as they spent more than they made in revenue with the difference coming from debt or payments from their owners. Development and manufacture of the 1.6 liter V6 engines is F1’s most-expensive cost item but this is covered by the auto makers rather than the teams. After research and development, staff pay is usually the biggest cost for an F1 team.

Testimony to this, the parent company of energy drinks giant Red Bull’s F1 team had total costs of $367.9 million (£279.4 million) in 2017 and spent $142.1 million (£107.9 million) on research and development followed by $109.2 million (£82.9 million) on its 793 staff. A total of 41% of them worked in design with 18.5% in administration and 40.5% involved with racing and production.

Seven of the ten F1 teams are located in Britain so have to file publicly-available financial statements every year. The three exceptions are Swiss-based Sauber as well as Ferrari and Toro Rosso in Italy. One team that is missing is Force India as it crashed into administration, the British equivalent of Chapter 11 bankruptcy, in July last year. It was resurrected under the new company Racing Point but its predecessor still hasn’t filed its 2017 financial statements. It isn’t the only omission.

The teams’ staff costs don’t always include the turbocharged salaries earned by their drivers. Instead of paying the drivers a salary and putting them on the payroll, some teams pay service fees to offshore companies which in turn pay the drivers. These payments are included in the teams’ general costs rather than part of their payroll which is why the wage bill doesn’t include the drivers.

It is a perfectly legal structure which helps the drivers to operate in countries with different tax regimes. Certain countries levy taxes on the earnings of sports stars competing there but it is harder to argue this if they aren’t actually paid a salary. The consequence is that the results in the table below aren’t skewed by drivers’ salaries.

Mercedes invests more in its staff than any other F1 team

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The data shows that in 2017 reigning champion Mercedes invested the most in its staff, with a wage bill of $114.8 million (£87.2 million), whilst Renault spent the least. Its staff were paid $52.3 million (£39.7 million) which was just $7.6 million (£5.8 million) higher than a decade earlier.

Not only has the average wage bill per team accelerated but so has the average payment to each staff member. This has increased 46.6% from $76,000 (£58,000) in 2007 to $112,000 (£85,000) a decade later. Although a complete set of 2018 financial statements isn’t available for the teams, Williams has filed its results and they show that this upward trend is continuing. Its staff were each paid an average of $108,000 (£82,000) in 2017 and $111,000 (£84,000) last year but it might not be long before the teams are forced to put the brakes on these increases.

The teams’ race contracts expire at the end of next year and after that F1 is planning to gradually introduce a cap on spending which will reportedly start at $200 million and will reach $150 million in 2023. It would put the brakes on the teams outspending each other in a bid for victory but could also lead to massive redundancies.

As we revealed last year in Britain’s Daily Mail newspaper, as many as 1,250 jobs could be lost due to the spending limit so the days of ever-increasing wage bills may be reaching the end of the road.

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